The new 'grabification' agenda

By Bernadette Meaden

April 14, 2014

When the Soviet Union collapsed a small group of people suddenly became extremely rich. They acquired huge State industries at ridiculously low prices. The people referred to this process as "prikhvatizatsiya," or "grabification."

New Russian oligarchs soon became familiar figures in the West, as they used their billions to buy Premiership football clubs and prime London real estate. Of course, the collapsing Soviet Union was in turmoil, and the scale of ‘grabification’ was huge, but are we seeing a similar process happening in the UK today, albeit with a little more decorum?

Since 2010, the pace of outsourcing and privatisation has been remarkable, in almost every area of public service. From prisons to probation, from the NHS to education, highly lucrative contracts have been handed out to the private sector. And it seems that no matter how badly these private companies perform, they can never fail badly enough to lose the chance to make yet more money from the taxpayer. Despite still being investigated by the Serious Fraud Office, and having agreed to pay back over £100 million it had overcharged, G4S is once again allowed to bid for government contracts.

Yet once such a public contract has been secured, it does not take a commercial genius to make money from it. In a fascinating piece in the London Review of Books, David Runciman, reviewing a biography of Richard Branson explained:

"Like the Russian oligarchs, Branson has made little of his money in the white heat of market competition. He prefers to avoid competition when he can. His business strategy is to get as close as possible to the people with power and then exploit the connection for all it’s worth. As Bower reports, Branson’s record in launching new products and breaking into competitive markets is pretty lamentable... He has made his fortune out of the regulated parts of the economy, which he has milked to extract government subsidies, tax breaks, licensing agreements and protected income streams. Transport works for Branson – trains as well as planes – because it rewards the person who gets the routes. How do you get the routes? By persuading government officials and industry regulators to give them to you."

Now Branson is moving into the NHS, with Virgin Care. It must feel like Christmas every day. In February 2014 the Care Quality Commission reported that the Urgent Care Centre at Croydon Hospital, run by Virgin Care, was using receptionists with no medical training to decide if people needed to go to A&E. In Teesside, Virgin Care got the sexual health contract and Channel 4's Dispatches reported: "The service repeatedly missed targets on the numbers of people screened for Chlamydia. A memo revealed staff were asked to take home testing kits to use on friends and family to help make the numbers up."

Last month we learned that commissioners in Staffordshire are inviting providers to bid for two ten-year contracts for cancer care and end of life care, worth a total of £1.2 billion. Who knows who will be the successful bidder?

In education there may not be big profits to be made just yet, (that may come) but there are certainly valuable assets at stake. Much confusion surrounds what happens to school land and buildings when a school is transferred from Local Authority control to become an Academy. On 12th April 2014 @ed_son tweeted: "I'm a school governor. Had a meeting about academisation and I asked who'd hold the deeds. Nobody knew. It's a shambles."

Over a year ago Mel Kelly submitted a Freedom of Information request to the Department for Education, asking for detailed information on the location and value of title deeds relating to land and property transferred from Councils to Academy companies. The DfE said that the request was too wide ranging, so Kelly narrowed it down to "Can you advise the total value of the title deeds for schools and land transferred to ARK Schools (and related ARK Companies)?" It is worth noting here that a co-founder and Trustee of ARK is Lord Fink, known as ‘the godfather of hedge funds’, principal Conservative Party Treasurer, and who has given over £2.6million to the Conservative Party.

Astonishingly, the reply from the DfE was:

"Following a search of the Department’s paper and electronic records, I have established that the information you requested is not held by this Department. We suggest that you could ask ARK for this information."

Public assets, bought with public money, allegedly transferred to private companies at little or no charge, and the responsible government department holds no record?

The current government, its supporters and advisers, appear to hold an almost religious belief in the private sector, and its ability to do virtually everything better than the public sector.

Experience has shown us time after time that this is simply not true. The primary objective of a private company is to make a profit. Often the only people privatisation or outsourcing appears to benefit are those who take the profits. We should be very wary of becoming victims of grabification.

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